fall16q06

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University of Pennsylvania *

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238

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Business

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Nov 24, 2024

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pdf

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6

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SIXTH QUIZ FNCE 238/738 November 21, 2016 WRITE ALL ANSWERS ON THE TEST. IF YOUR ANSWER CONTINUES ON THE BACK, MAKE A NOTE OF IT ON THE FRONT. 50 PTS / 25 MINUTES NAME:_____________________________________________ SECTION (12, 1:30 or 3):__________________________________
1. On 11/11/16, after Active Biotech AB closed at SEK10.03 in Stockholm, we read this news: Today, 11 November 2016, the board of directors of Active Biotech AB has resolved, based on the authorization from the general meeting, on a rights issue of approximately SEK 55 million. • The shareholders of the Company have pre-emptive rights to subscribe for the new shares, whereby 13 existing shares entitle to subscription for one new share. Subscription for shares in the rights issue can only be made with pre-emptive rights. • The subscription price amounts to SEK 8 per share. Subscription shall be made during the period 23 November - 7 December 2016. • The rights issue is at no cost guaranteed in its entirety by Active Biotech's largest shareholder MGA Holding AB. a. (10 pts) At what discount is this offering priced from the TERP? b. (5 pts) What risk does MGA Holding AB assume by guaranteeing the issue?
2. Recent news from Shearman & Sterling: Institutional Shareholder Services Opposes Anti-Takeover Charter Provisions In IPOs Shearman & Sterling LLP 10 November 2016 Mondaq Business Briefing (c) 2016 Mondaq Ltd Proxy Advisory Firm Policy Developments In November 2015, Institutional Shareholder Services adopted a "vote against"/"withhold" policy for the directors of companies that prior to or in connection with their initial public offering adopt charter provisions or by-laws which it considers to be anti-takeover defenses, such as: a classified board, supermajority voting requirements or other limitations on the amending of the charter or by-laws, or dual-class share structures. a. (3 pts) Why are the policies of Institutional Shareholder Services important to the market? What is the source of its influence? b. (4 pts) What do classified boards have to do with takeovers? c. (3 pts) Does the opposition of ISS to classified boards discourage tech firms from going public with classified boards? What evidence have we seen?
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3. On October 17 th , BlackLine reported the following in an amended S1 filing: This is an initial public offering of shares of common stock of BlackLine, Inc. Prior to this offering, there has been no public market for the common stock. It is currently estimated that the initial public offering price per share will be between $13.00 and $15.00. We have applied to list the common stock on the NASDAQ Global Select Market under the symbol “BL”. Following this offering, our Principal Stockholders (as defined herein) will control more than a majority of the voting power of our common stock and we will be a “controlled company” within the meaning of the corporate governance rules of the NASDAQ Stock Market. We have elected not to take advantage of the “controlled company” exemption. We are an “emerging growth company” as that term is used in the Jumpstart Our Business Startups Act of 2012 and, as such, may elect to comply with certain reduced public company reporting requirements in future reports after the completion of this offering. a. (5 pts) Given that BlackLine ultimately went public at $17/share, is it likely or unlikely that the underwriter exercised the overallotment option? Explain. b. (5 pts) Besides the reduction in future reporting requirements, what else does BlackLine get from the JOBS act?
4. (5 pts) News item on 11/2: (Bloomberg)—Tronc Inc. Chairman Michael Ferro played hardball with Gannett Co. and in the end, all shareholders got was a lousy name change. Over the past six months, Ferro frustrated investors by throwing up roadblock after roadblock to a deal with the owner of USA Today. From implementing a poison pill to doling out equity to a business associate to abandoning the esteemed Tribune Publishing name in favor of something that sounds like a person blowing their nose, it seemed no tactic was off limits. All would have been fine if he eventually got a deal done with Gannett at a rich premium. But instead, Gannett announced on Tuesday that it's abandoning its pursuit of Tronc. What, in this case, would it mean to institute a poison pill, and why would that matter?
5. (10 pts) Briefly, what assumptions lead to the conclusion that supermajority votes do not aggregate the private information of all shareholders?
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